State-owned Korea Development Bank (KDB) plans to price debt as early as Wednesday, taking advantage of a broad market recovery as upbeat data from China and Australia lifted investor sentiment. The Asia ex-Japan iTraxx investment-grade index narrowed 3 basis points (bps) to 133, traders said, easing from a near two-month high posted on Tuesday.
-- Chinese developer Powerlong plans to issue bond
In August, the index posted its biggest monthly jump since May, when investors sold riskier assets on fears of a sovereign debt crisis in Europe. The firm tone was matched by trading in European issues. The investment-grade Markit iTraxx Europe index narrowed to 117 bps from 120 bps late on Tuesday.
Asian stocks rebounded from a sell off on Tuesday as investors were encouraged to pick up riskier assets by rises in China PMI indexes and faster-than-expected economic expansion in Australia. "The China PMI coupled with a positive GDP out of Australia this morning are supporting the market," said Vijay Chander, head of credit strategy at Standard Chartered Bank. "Asia is definitely in a much better position than the West, the US in particular. The data proved that to be the case."
Asian credits may see more upside as investors are seen covering short positions after a mild selloff since last week following weak US economic data. "The sentiment is still very constructive and there will be a period of some strength over the short term just to relieve the oversold conditions," Chander said. "A lot of the negatives have been priced in, particularly the negatives related to the US economy which was holding sentiment down." KDB is set to issue a 5.5-year benchmark-sized bond later in the day at around 195 bps above US Treasuries.
The KDB bond would offer a yield pickup of around 40 bps against its existing debt due in 5 years, traders said. Chinese developer Powerlong Real Estate Holdings said it planned to issue dollar bonds, joining underground mall developer Renhe Commercial Holdings, which plans to price its debt on Thursday.
The market was positioned to absorb the new supply, Chander said. Korea's Woori Bank debt due in 2016, an actively traded issue, narrowed 5 bps over US Treasuries, while China's Country Garden bond due in 2017 was of a point higher at 100.50 cents on the dollar, traders said.
Sovereign debt from Indonesia and the Philippines also firmed, while their credit default swaps (CDS) narrowed. Philippine debt due in 2020 rose nearly a point to 119.5 cents on the dollar, while Indonesia's bond due in 2020 was up half a point to 113.75. The iTraxx SovX Asia Pacific index, which tracks the 5-year sovereign CDS of 10 countries in the region, tightened 3 bps, traders said.
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